How we got our first 5 million users … with no marketing budget

We didn’t have the money. So we got creative.

Chances are if you’ve just started a tech company, you won’t be in business for long. As many as 90% of tech startups, according to some estimates, end in failure. And while the hurdles for a new business are many, one of the biggest is finding users, or more specifically, finding users in a way that’s financially sustainable.

Take apps, for example. The average cost to acquire a loyal user (defined as someone who opens an app at least three times) now stands at $2.80, near an all-time high. With literally millions of apps competing for attention on Apple’s App Store and the Google Play Store, startups are finding themselves forced to pour ever greater sums into marketing efforts.

But more money isn’t always the answer. In my company’s first three years, we grew our user base from zero to five million people. (We’re a social media management tool, currently with 11 million users.) During that time, our marketing budget was pretty much non-existent. We turned instead to a pair of complementary, low-cost approaches to find and keep customers. It might have made all the difference.

Understanding Freemium Economics

One fundamental decision we made shortly after launching in 2009 was to make our tool a freemium service. The overwhelming majority of our users — and we quickly reached the million mark — paid nothing. They could (and still can) log in for free to view their social media accounts from one dashboard, schedule messages and see analytics. Companies that wanted beefed up functionality and extra support, on the other hand, paid a monthly fee, ranging from as little as $9 to $1,000 and up for large enterprises with lots of employees.

At the time, freemium certainly wasn’t new. Cloud-based tools like Skype, Dropbox and Evernote had all built successful businesses on the model. Still, our approach was greeted with a lot of skepticism. Why give away a service that people seemed perfectly willing to pay for? Why invest so many resources catering to millions of free users who would never account for a cent of revenue?

A few reasons. For starters, freemium radically reduces the need for traditional marketing and sales efforts. Our free users — in steady, predictable numbers — became our paid users. Instead of having to sell them on the merits of our product with expensive ads, we were able to let them see for themselves. Our product itself became our best marketing tool and our best salesperson.

In many cases, a handful of employees at a particular company would begin using Hootsuite for free and love it. Ultimately, the boss would take notice and upgrade to the more robust paid version for company-wide rollout. Indeed, on average more than half of our paying customers — including large clients — start out as free users.

Meanwhile, our free user base fulfilled another key function: It kept us honest. Free users are fickle; they’re not locked in by a contract or any other obligations. They can, at any moment, pick up and take their “business” elsewhere. So in order to maintain and grow our free user base, we had to continually update our product, rolling out new features — including scheduling functionality and integrations with emerging networks like Instagram — to stay ahead of the pack.

These same features, of course, helped us win and keep paying customers. While other corporate tools were years behind the social media curve, our quest to satisfy free users meant we could offer big enterprise customers the latest technology.

Investing in Community

But it’s important to note that freemium was just one part of our formula for user growth. Another big piece of the puzzle was investing in a fully functional community department at Hootsuite. In many startups, the community team — if there’s one at all — is treated as an extension of marketing or customer support. While their ostensible role may be “building a community” of users, they spend a lot of their time pitching products and fielding help calls.

Our community department, by contrast, didn’t have direct sales or support responsibilities. Instead, their primary mandate was to help people who already knew and loved our product connect with one another. They built out social media channels in a half-dozen key languages, enabling users around the world to share updates and learn about Hootsuite news and events. And they organized crowd-sourced translation efforts, recruiting international users to adapt our interface into local languages, everything from German and Italian to Thai and Chinese. (Amazingly, translations were volunteer-driven — motivated by love of the technology and a liberal helping of swag, i.e. stickers, t-shirts and cuddly stuffed animals inspired by our owl logo.)

Online efforts were supplemented by old-fashioned face-to-face events. In emerging markets, the community team helped users organize hundreds of free meetups (branded as “HootUps”), where people could get together and trade Hootsuite tips. Ultimately, a network of hundreds of volunteer “ambassadors” around the world took shape, enthusiastic users who spread the word about Hootsuite in their countries. Many of these ambassadors, not surprisingly, were bloggers, consultants and marketers who just so happened to have large online audiences of their own.

Cumulatively, these projects gave us entry into new markets, initiating the viral chain of adoption in other countries and spreading Hootsuite far beyond its original North American user base.

Our marketing budget has definitely grown from the early days, but freemium pricing and a strong community team remain two absolutely critical engines of growth. This toolkit won’t work in every context. But for companies offering a cloud-based product that fills a pressing need, that actually works as promised and that people get excited about, they represent viable, low-cost alternatives to dumping huge sums into marketing and advertising.